4/30/20 MARKET CLOSE Update - Consolidated Analysis

This is my singular thread that encompasses all areas of review for the day in the market.

QUICK SUMMARY:


Nobody left to Squeeze? Day:


  • Volatility bounced back today off oversold conditions - VIX +9.35% and VXX +7.33%

  • UUP was down 50 bps today into the lower end of it's range - somewhat expected.

  • The Ketchup Team (IWM/XLF/XHB/XRT) got benched.

  • SPY was flat overnight and sold off most of the day intra-day which is meaningful

  • Oil keeps rewarding Robinhood USO dip buyers.

  • Semiconductors gave back the entire move from last two days - termination bar and lost the MSL and the support it took back

  • Tech was strong into the open more than others but got hit and lost the MSL

  • HYG hard rejection out of the distribution box

  • DIA rejection at the resistance level

  • FAANGs looks pretty cooked here...FB gave back most of its earnings spike, AAPL faded at the earnings, AMZN faded at the earnings and GOOG/MSFT red on the day.

  • Internals were torched today - but this time the bears brought it

  • Absolute Breadth proved to be the fly in the ointment after all.


Markets did not get the overnight squeeze last night. Seems like there were no more bears left to squeeze after the last few weeks. Maybe this was a giant squeeze/termination event?


Here is a thought: from the March low the first out the gate and hot squeeze fodder was tech, semis, and health care/bio momentum and FAANGs (squeezes led by XBI, XLV, NVDA, AMD, NFLX, then AMZN, et al one by one squeezed week after week), followed then by SPY, Utes, Telecom bunch, then last one leading up the squeeze train was the ketchup crew of IWM, XLF, XRT, and XHB (which were the worst hit and happened to be the most shorted). Today looked like there was no one left to squeeze, so the market started to just drop.

CTAs flipped to full on 100% long from approx 60% short in ES futures this week (gave in) and then you have the Robinhood users buying full on calls again this time on stuff like SPY, IWM, and USO. So this really looks like the completion of a squeeze induced, momentum chased, and liquidity fueled buying orgy...that always leads to termination patterns and tons of left behind FVGs at much lower levels...so now what?


Too early to tell, but I have a case study and write up of XBI at the very bottom. You can see what the termination event looks like after a parabola-like price rise. This is what I was referring to this week. We keep going from equity nirvana (suppressed VIX/positive GEX/short squeezes) to a doom loop (broad market vol (absolute breadth)/explosive VIX/negative GEX). Are we now transitioning to a doom loop again? Too early to tell but JFC did SOXX and QQQ give it all back today for the neutral MSL patterns they created. Probably be a few days before we know for sure but looks like the bulls fumbled today.

SECTORS:

Sector Takeways: With no one left to squeeze, everything goes red (sans USO because that is still is epic reflexive squeeze going on over there). A little commodities and ag strength...worth monitoring.

VOLATILITY:


VIX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Reset - Neutral

Internals: N/A

Block Volume: N/A


VXX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Neutral

Internals: Negative

Block Volume: Positive

GEX: Negative


VIX/VXX Summary: VIX and VXX showed up today with some steam but still have plenty of work to do before they get bullish. Basing action would be more how I would describe this if anything. VXX still needs to get bullish momentum going, get the money and velocity over zero and get the blocks to start moving to green bars. None of that is happening, but today is a positive step in that direction. GEX is also lighting up. Looks like from the GEX map that 40 is a major level and then 44. Over 44 this could run hot.

INTERNALS


TRIN:

Takeaway: BTFD crowd here on these readings. Price was declining and they were just frothing at the mouth to get them some (Put/Call ratios confirmed this buying heavy into weakness today).


ADVANCERS/DECLINERS:

Takeaway: Bearish pac-man pattern today eating up those recent prices.


NYSE ADVANCERS/DECLINERS:

Takeaway: Firm rejection at the MSL level today. Momentum is stalling at the upper bound. Could still try to recover tomorrow, but decent damage done today.


CUMULATIVE VOLUME:

Takeaway: Bull Bear pivot became resistance for Cumulative Volume. This is not overly bearish but momentum is pretty spent.


ABSOLUTE BREADTH:

Takeaway: MONITOR. Even more pronounced today. If this doesn't give the readings back tomorrow in session, this week could post one of the strongest broad market volatility warnings since week of Feb 24-28, 2020. See what happens tomorrow.


MCCLELLAN OSCILLATOR:

Takeaway: No Air Jordan's for the moody McOs. Rejected from the Embedded level and now back in the sell. Momentum is still got a little left in the tank...so maybe a stab at strength tomorrow but my suspicion is it will be sold.


INTERNALS Summary: Internals had the bears by the throat and did not finish them off. will they pay for this?...we will have to wait and see.


INDEXES:


SPY: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Positive

Block Volume: Neutral

GEX: Negative

Put/Call Ratio: Neutral/Bearish


SPY Summary: Bulls had the bears where they wanted them...but didn't finish. Now GEX big negative, block volume is spent to the buy-side and about to turn negative, and didn't get to the MSL levels. Have to see what happens next couple days b/c money and velocity are still ok at the moment. Put/call is neutral but leaning bearish with the consistent call buying taking place on fading price.

QQQ: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Neutral

Internals: Positive

Block Volume: Negative

GEX: Negative

Put/Call Ratio: Neutral


QQQ Summary: Gave back the MSL today. GEX negative now. P/C is neutral. Block volume negative. Internals only thing left positive and no more earnings balloons to hold onto...next few days are pretty important for tech.

SOXX: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bullish

Internals: Positive

Block Volume: Negative

GEX: Negative


SOXX Summary: MONITOR. If this is really total give back fail, it will be a notable one. This had done what it had to yesterday. Today it put a potential termination candle on the board. Tomorrow is a new day but now MSL and trend lines are resistances and not support. Next few days are very serious for this index and no real earnings heavy weights left to speak of..

DIA: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Positive

Block Volume: Negative

GEX: Positive

Put/Call Ratio: Neutral


DIA Summary: Dow Jones just keeps hitting its head against the trend channel. Spending a lot of time and energy trying to get into that channel. Today was not a good day for bulls here. They need to get this into that channel ASAP. Or bears going to put them in the doom loop.

IWM: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Positive

Block Volume: Neutral

GEX: Negative

Put/Call Ratio: Excessive Bullishness/Bearish


IWM Summary: This stinks of a terminated short squeeze and all that is left now is dumb money chasers. This is not a confirmed termination candle as we need to see the next couple days action, but certainly setup as one. Volume disappearing, GEX negative and price back in the negative strikes forest again, and P/C is super bearish with bulled up greed buying calls. This was pretty beat up today so could see some relief bounce tomorrow?...regardless the next few days are critical now for bulls.

BANKS & HIGH YIELD CREDIT:


XLF: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Positive

Block Volume: Positive

GEX: Negative


XLF Summary: Rejected yet again...always a bridesmaid-never a bride it seems for the banks. The $23 level is serious resistance based on our system OI schedules. The GEX is now back markedly negative but price did try to find support at the first FVG left behind. Next week is now critical for banks.

HYG: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Neutral

Internals: Positive

Block Volume: Positive

GEX: HEAVY Negative


HYG Summary: Rally today into the distribution box was met with sellers. Ugly candle. Nothing really ultra positive about this GEX here above. That hasn't changed for 2 months now. Have to keep watching this for signs of real price problems but for now...range bound action persists. That could change next 30-45 days...

TREASURIES, $USD, and PRECIOUS METALS


TLT: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Negative

Block Volume: Negative

GEX: Positive/Neutral


TLT Summary: Price dropped today into the accumulation box and looks to be headed for filling the FVG gap left behind last week. Short term this is bearish (as visible in the GEX above) but long term still markedly bullish. This is a buy at the 163.74 level or the 158.87 level. Below there I would be concerned, but that is quite a ways from here. Pulling back here is in the cards as the bearish momentum has been in place for days now.

UUP: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Bullish

Block Volume: Positive

GEX: Positive


UUP Summary: Price weakness today in UUP that filled two important FVGs below. Momentum is still negative as we expected this week but it is getting closer to the lower bound where daily resets come into play. All in all still being accumulated in large buyer blocks, price is still in the accumulation box, GEX very positive, and momentum nearing a reset. Pretty much what was expected this week. Next week should be more insightful into intermediate term trend to play out.

GLD: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Positive

Block Volume: Positive

GEX: Positive


GLD Summary: Gold started its pull back and gave back both supports so now it heads for nearby FVGs. Still bullish MSL but will be in a pull back for a while. GEX could unwind some as you can see there is lots of air between 155 and 150. Below 155 could gap quickly with these lower FVG magnets. If you are long and holding, wouldn't hurt to grab some put insurance or collar this (sell calls upside to fund buying put insurance downside creates a net neutral position)...just a thought. I am flat and will look to add GLD lower.

SLV: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bearish

Internals: Neutral

Block Volume: Positive

GEX: Positive


SLV Summary: Silver broke the price support level today. That is near term bearish. We will have to see the reaction at the lower FVG levels. Momentum is bearish. Internals are collapsing and volume is about to cross zero line. Don't 'hope' here..be prudent.

GDX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Positive

Block Volume: Positive

GEX: Positive


GDX Summary: GDX really needs to hold 30.52 or 26.27 will happen in a flash. This is a dangerous setup here with bearish x-over on momentum and internal buyer block volume about to go sell side. 30 is big deal for GEX (see above) as below it negative strikes come into play and will flip this structure. Be aware and see my comments above RE GLD and collaring your long position if you are trying to hold onto it.

MARKET STRUCTURE LEVEL CASE STUDY: XBI Potential Termination Example


Summary: Wanted to show you what a termination looks like to me. XBI candle Tuesday was big ugly bearish candle that took two days of price action out of the game. Then Wednesday tried to take the MSL back...Thursday made sure that there was no doubt rejecting firmly off the MSL again.


Now we have the last support at 93-94 area playing safety net but once that is gone, 83.30-86.84 are somewhat of a support with FVGs but this will more than likely get to 75.87 before making a real decision. We will have to see how it plays out level by level, but you can see that this straight up, no price discovery, liquidity induced short squeezes create unhealthy price structures that lack back and fill price auctions to sort out real, tangible price levels. This is almost mechanically induced (unintended but nonetheless dangerous) volatility...see below of how this works:


Equity Nirvana - (Vol Suppression leads to positive GEX leads to shorts being squeezed leads to straight up price action)...


which terminates as sellers disappear (none left to squeeze) leads to the...


Doom Loop - (Vol Explosions leads to neg GEX leads to massive price swings leads to puke selling leads to...


Every buy-side only program (Pensions, CFAs, Endowment, etc.) lining up outside Jay's-R-Us...rinse/repeat...


THE END.


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